Parking Rates & Revenues Discussion

Very closely allied with the investigation of parking supply versus parking demand would have to be a consideration and discussion of the rates charged for parking. One fallacy that is necessary to overcome is that parking is or should be free. Developing parking lots, (or parking structures) has a cost attached for land acquisition, site preparation and construction. There are also costs incurred in properly maintaining and securing parking areas. Among the most equitable programs are to charge the users for providing this service. Many universities are looking to parking to stand on its own without contributions from general funds which the administration feels can be better spent on improving the academic product of the university. Instead, fees generated from parking are applied to providing and improving this necessary service.

It would come as no surprise that unattended vehicles are tempting targets to thieves and vandals. We believe it would be safe to say that many if not all vehicle owners expect personal safety as well as the safety of their vehicle when they park their car. This would be whether they are paying for their parking or parking for free. The university has accepted this consideration with the provision of CCTV on numerous campus parking areas which are actively monitored. It is our understanding that the cost to provide this measure of safety is, at least in part, paid out of parking revenues. Capital improvement plans are to continue this improvement to those parking areas not presently under surveillance.

The university parking department has pursued a process of improving lots 20, 21 and 22 over the last few years. Presently lots 22a and Lot 23 are unimproved gravel lots for which students and faculty and staff, if they so choose, may park for free. These lots are furthest from the campus and as gravel can become quite muddy during wet weather hence the justification for the "free parking" designation. However, requirements by the City of Mankato to eventually if not immediately asphalt these lots and their relative convenience to the Taylor Center, when it opens, makes a compelling case for elimination of the free parking. Even though these lots were unimproved, the university was still lighting and providing the shuttle bus service to them for which no real revenue was being collected but which obviously have a cost attached. While we understand that upon the completion of the improvement process that the free parking would be eliminated, that is not expected to occur until the 2001/2002 academic year. The university is providing a service with the provision of parking spaces and in our opinion there should be some charge for this, particularly with the parking department historically operating at a deficit. While the spaces are unimproved, we would certainly agree for a discounted rate but also feel that it is easier to go from paying something to a higher rate. For example, it may be more palatable to go from $60.00 now for parking on the unimproved lots, to the proposed $110.00 for purple permits once the improvements are completed (a $50.00 increase). This would be instead of going from $0 to $110.00 (a $110.00+ increase) or whatever the rates may be at that time once the improvements are done. With the opening of the Taylor Center, these spaces would no longer be considered so "remote" and we feel that it would be counter productive to significantly discount the rates for parking here.

Given these aforementioned factors and the expenses incurred by the parking and traffic services department to insure not only adequate parking but also attractive parking (asphalt spaces) there is persuasive reason to insure that adequate funds are available. Continuing increases in costs for labor, supplies, construction etc. should be reflected with more regular adjustments in parking rates. Although unfortunate, the policy of parking supporting itself with no public tax subsidies or university subsidy are compelling reasons for the fund to remain solvent and be able to provide for parking needs.

A second issue pertaining to this is the effect of university growth on parking. A prime example is the development of the Taylor Center that eliminated nearly 300 surface spaces. As so often happens as universities grow, new buildings frequently are sited on existing parking that not only eliminates parking supply but also, often results in increased demand to that portion of the campus. Limitations on preserving campus green space further point that at some point the only option may be to provide the parking in a structure. Whether the university would have the funds available in such an eventuality is a function of the planning done for campus growth and the management of parking revenues to achieve this goal.

One concept that we have seen applied at other institutions is that any new facility that is developed and that eliminates existing parking must have included in its project costs a payment to the parking system. This is set at an amount equal to the costs to provide each eliminated space in a parking structure. For example, should a new facility be planned that would eliminate 100 surface spaces than one million dollars (100 spaces x $10,000 per space or the approximate cost to construct structured parking) would be paid into a special parking fund. This money could be used to offset the cost to build a parking structure.

The current permit parking rates are proposed to increase for the 2000/2001 academic year. Information provided by the university comparing rates at MSU with other Midwest schools of comparable enrollment show the university ranking 3rd highest in the cost of unrestricted permit rates among 10 universities queried. If the summer refund were factored in, then MSU would rank 4th highest among the universities questioned. Higher rates for the unrestricted permit, equivalent to the MSU gold, are seen at the University of Minnesota - Duluth at $277.00 per year, University of Wisconsin-Oshkosh at $240 for 9 months. Central Missouri State University is $20.00 per month that over a 9-month academic year would equate to $180.00. Application of the $40.00 summer refund available on MSU' s unrestricted rate would result in a parking rate that is currently equal to only $140.00 and even at the new higher rates proposed is only $150.00.

Rich and Associates have performed a simplified analysis of the costs to provide structured parking under two alternatives 1) if the debt service and operating expenses were pledged against the entire parking system and 2) if the facility were forced to "stand on its own." In this latter concept the structure would be forced to charge permit and transient rates such that it covered 100% of its debt service and operating expenses.

Table 3 above provides an example of the potential revenues that would be earned after increasing the current parking permit parking rates and including charging for what are currently the "free" spaces. Given these assumptions, the forecast revenue would be approximately $927,000. The most recent expense figure provided from parking services totals $782,000 which would result in an approximate $145,000 surplus. A portion of this money could be designated toward a parking structure fund should that become a necessity in the future due to loss of parking supply.

Table 4, on the following page, demonstrates the above revenues, plus the revenue that could be earned in a new parking facility assuming that all parking revenues and expenses could be pledged to offset the debt-service and operating expenses of the new facility. This would mean that the rates for parking in the new structure would be comparable to the proposed rates for the University's surface lots.

Table 4 shows that a parking deck of 400 spaces with 50 spaces allocated for permits and the remainder used by "transient" users could generate gross revenues of $519,000. This would have the permits comparable to the proposed permit rate for gold permit holders and assumes transient rates of $2.00 the first hour and $1.00 each additional hour. The average stay (and resultant ticket average) is shown at what the existing pay lot is currently showing. The turnover, which is simply the average number of times a parking space is used in a given day, in the existing pay lot is 3.8 times. For the example shown the turnover is reduced slightly to an average of 3.0 times. The parking deck reflects an average operating expense of $200.00 per space per year. Operating expenses for the Minnesota State University parking system are averaging $156.00 per space per year based on the most recent data available (FY99).

It should be noted that the above example is a very simple example. Depending on the siting of the deck some existing surface spaces could be eliminated such that not all the forecast revenue would be available. It is also not clear that the ticket average and turnover rate could be generated since the costs would be higher than what is presently charged in the pay lot at $1.00 per hour.

Table 5 on the following page shows an alternative analysis of what might have to be generated if a tabletop parking structure were developed and had to stand on its own. Using the same debt service and cost of operation of the previous example and assuming different numbers of permit holders parking in the deck (50,100 or 200). Under Option 1 which assumes 50 permit holders and maintaining existing transient rates of $1.00 per hour, these 50 permit holders would have to pay more than $1,900 per year. Obviously, not realistic. If the transient rate were permitted to increase and the permit holders in this deck paid the currently recommended gold permit rate of $200.00 per year, than each transient vehicle would have to generate a ticket average of $2.42 which could be attainable at the new transient rates. If instead 100 permit holders were allowed in the new deck, then each transient vehicle would have to generate $2.75 (also attainable) and at 200 permit holders, each transient vehicle would have to generate $3.91 in revenue. Assuming increasing costs of operation, these rates would have to increase each year.

Table 5
Minnesota State University - Mankato
Comparison of Parking Rates with New Tabletop Parking Structure

Summary

The previous examples are simply intended to show that while development of a parking structure may be possible, it would require a significant increase in the rates charged transient users on campus depending on the groups it would be intended to service. Obviously development of a parking structure to accommodate residence hall students with such high permit cost would be dissuasive. As more permit holders are permitted in the structure with their relatively low daily revenue generation, then if the revenue generated by the permits is not sufficient than the transient rates to make up the revenue needs and support the facility would have to be even higher. In any case, a more detailed analysis would have to be completed to appropriately gauge the actual costs and revenues that could be expected.

Parking Structure Construction/Development Costs

Tables 6 and 7 on the following two pages detail the construction cost for both a conceptual multi-level parking facility and for a simple one-level (tabletop) type parking deck.

Table 6 shows the detailed costs for a 400 car multi-level parking facility. Using reasonable costs of construction, the table shows that the per-space costs would be approximately $10,694 allowing for a reasonable façade treatment for the building.

Table 7 shows an alternative configuration for a 400 car tabletop parking facility where the per space costs would be about $8,326.

Table 7
Preliminary Cost Estimate
Minnestoa State University
Table Top

The following section details the project costs and compares the anticipated cost of providing each additional space in a structure (tabletop or multi-level) versus the cost to provide nearly the same number in new surface spaces developed assuming property acquisition.

Tables 8 and 9 on the following two pages detail the project finance costs associated with developing a new parking structure and assuming the University went into the market to sell bonds to construct the added parking. These take the basic construction costs one step further by including in the project costs; design fees, geo-technical costs, insurance costs and calculate the costs of financing. The table demonstrates varying interest rates starting at 5% and ranging in one-quarter point increments up to 7.25% since the University's potential cost of borrowing at the time this could be funded is not known.

The tables show the project costs including design fees and certain other costs to be financed together with the costs of financing which would vary depending on the interest rate available. Certain costs are calculated as percentages of the final funded amount developing down to an annual debt service amount

Table 10 below summarizes the project cost both with and without the financing cost included and demonstrates the cost on a total per car space basis and on a per net car space added basis. As was mentioned previously, while the revenue potential exists presently to support development of structured parking, the development of parking in this manner would still be quite expensive. As Table 10 shows for each net additional space created including the financing costs, the cost for each additional parking space created could range from $16,000 to nearly $19,000.